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It is a government-sponsored enterprise (GSE) that was created in 1938 to expand the flow of mortgage money by creating a secondary mortgage market. Fannie Mae is a publicly traded company which operates under a congressional charter that directs Fannie Mae to channel its efforts into increasing the availability and affordability of homeownership for low-, moderate-, and middle-income Americans.

Fannie Mae purchases and guarantees mortgages that meet its funding criteria. Through this process it secures mortgages to form mortgage-backed securities (MBS). The market for Fannie Mae's MBS is extremely large and liquid. Pension funds, insurance companies and foreign governments are among the investors in Fannie Mae's MBS. In order to promote homeownership, Fannie Mae also holds a large portfolio of its own and other institution's MBSs, known as its retained portfolio. To fund this portfolio, Fannie Mae issues debt known in the market place as agency debt.